The Malaysian Institute of Economic Research (MIER) has revised its gross domestic product (GDP) growth forecast for 2011 to 4.6 per cent from 5.2 per cent previously.

Its executive director Zakariah Abdul Rashid attributed the downward revision to weaker export growth due to increasing regional and global economic uncertainties.

azlan "However, the implementation of Economic Transformation Programme (ETP) projects and handouts from the 2012 Budget, designed to cushion the higher cost of living, will boost domestic demand," he said.

Speaking at a media briefing on the Malaysian Economic Outlook: Third Quarter 2011 Update in Kuala Lumpur today, he said the MIER's earlier forecasts were made nine months ago before the current uncertainty.

"Increasing global uncertainty from the eurozone is expected to dent economic outlooks for the US and China, leading to weaker export growth in Malaysia," he said.

Other negative factors that affect economic growth include Europe's sovereign debt crisis, global risk aversion, retreating global commodity prices, weak electric and electronic prospects, and high household debt.

"The ETP rollout projects and cash handouts as proposed in the 2012 Budget can boost domestic demand, but unlikely to offset underperformance in net exports," he said.

The MIER has also cut its 2012 GDP growth forecast to 5.0 per cent from 5.5 on the back of moderate growth momentum from the second half of this year onwards due to the weaker export outlook.

Inflation is likely to moderate to 3.1 per cent this year before trending lower to 2.7 per cent in 2012 following weaker economic outlook and lower global commodity prices.

"Monetary policy will remain fairly accommodative to support growth and the Overnight Policy Rate (OPR) is anticipated to stay at 3.0 per cent in 2011 to 2012 with a downward bias should domestic demand wane," Zakariah said.

The MIER expects the ringgit to hover around the 3.20 level per US dollar this year before appreciating to 3.10 in 2012 after falling 3.3 per cent in the last three months on selling pressure.

The ringgit traded at 3.12 today.

- Bernama